Advice on HP and payment protection
THESE financial mistakes should also be avoided: l Hire-purchase (HP) agreements. With an HP agreement you do not own the goods -- typically a car -- until you make the last repayment.
This means those with HP agreements do not have the option of selling their car.
Many of those who lose their job and can no longer pay the HP try to restructure the agreement, but this can often mean extra fees and interest.
Typical fees include interest surcharge for missed repayments, penalty fees, rescheduling fees and repossession charges.
Again, the best advice is to get a credit union loan instead. Credit unions tend to have some of the most competitive loan rates in the market.
- Payment protection
This is insurance that will pay out a sum of money to help you cover your monthly repayments on mortgages, loans, credit/store cards or catalogue payments if you are unable to work for certain reasons covered by your policy, such as illness or accident, or you become unemployed through no fault of your own.
However, it is expensive. For example, for a five-year €10,000 loan, payment protection could cost up to €2,000.
Remember that you do not have to buy payment protection insurance. Under our Consumer Protection Code, lenders should quote for it separate to your loan.
If they try to make it seem that you will not be approved for the loan without taking out the protection then they are acting illegally.
Known as a protection racket, many people find it is extremely difficult to make a successful claim on their protection insurance policy.